A curious resurrection of libertarianism

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In 2008, former Slate Editor Jacob Weisberg tried to kill libertarianism. In fact, it's been a year and a half since Weisberg wrote "The End of Libertarianism." Weisberg's piece ran in both Newsweek and on Slate. At the time, it was greeted with titters and 'amens' from O-bedizened hordes. What a difference a year and a half makes. Libertarianism has returned like a Terminator sequel.

It was Weisberg's Nietzsche moment. In other words, even if you're an atheist (as I am), you might feel a bit funny yelling "God is dead" from your rooftop while a mega-church is being built a block away. Likewise, whether or not you agree with free exchange among consenting adults, it might be a tad premature to stick a fork in libertarianism mere months before Hayek's Road to Serfdom hits sales records. Of course, Weisberg couldn't have anticipated the popular tea party movement. And in fairness, he wasn't arguing libertarianism "the movement" was dead. Just the concepts. He wanted to claim that the financial meltdown of 2008 proved laissez-faire economics was intellectually "bankrupt" and its precepts had somehow brought the nation to its knees.

"Haven't you people done enough harm already?" Weisberg queries with all the delicacy of Archie Bunker. "We have narrowly avoided a global depression and are mercifully pointed toward merely the worst recession in a long while. This is thanks to a global economic meltdown made possible by libertarian ideas."

Why bring this up now? you may be wondering.

First, one should never let a truly arrogant misfire go unpunished. Second, the 24-hour news cycle is threatening to kill our ability critically to reflect on events. But most importantly, we have the benefit of perspective now. Time, distance and the passage of events are punishing Jacob Weisberg for his pronouncement more severely than I could have done in a hasty blog post at the time. In any case, it's time to go back and reveal the inanity of Weisberg's stale screed. At the same time, I'll risk a more more tentative pronouncement of my own: Keynesianism is moribund. (And after 2010, it's not likely to return en force for at least another decade).

Weisberg's proof that libertarianism was "at the scene of the crime" of the '08 meltdown amounted to little more than an assertion dressed up as a cliche. For example, Weisberg rather oddly joined the chorus of those blaming Alan Greenspan, whom he considers to be some sort of libertarian exemplar. While Weisberg was right to critique Greenspan's policies, he was right for the wrong reasons. As I've written elsewhere, Greenspan "was housed in a government building, [h]e held an unelected office and made decisions in a bureaucracy that has a monopoly on money and influences the price of credit". One can hardly call that "market fundamentalism." But Weisberg does so without a hint of irony.

Ever heard of George Selgin's Good Money? How about End the Fed? Alan Greenspan was a powerful government (g-o-v-e-r-n-m-e-n-t) bureaucrat in charge of gathering enough data to determine the “correct” interest rate for a multi-trillion-dollar economy. Given the size of that task, he did an decent job for many years. But he was one man. And eventually his monetary policy helped create the bubble. To ask any single person (or board of "governors") to predict the best of all possible worlds and adjust interest rates accordingly is to ask him to be an oracle channeling the knowledge of God.

Greenspan was not omniscient. Nor is Ben Bernanke. No one is. But “running” an economy as if it were some sort of machine would require not only omniscience, but omnipotence—a power that would bend the actions of millions to its will. But you can't run an ecosystem.

I guess you have to know a little bit about libertarianism before you dance on its grave.

Now, consider this caricature from Weisberg:

The worst thing you can say about libertarians is that they are intellectually immature, frozen in the worldview many of them absorbed from reading Ayn Rand novels in high school. Like other ideologues, libertarians react to the world's failing to conform to their model by asking where the world went wrong. Their heroic view of capitalism makes it difficult for them to accept that markets can be irrational, misunderstand risk, and misallocate resources or that financial systems without vigorous government oversight and the capacity for pragmatic intervention constitute a recipe for disaster. They are bankrupt, and this time, there will be no bailout.

As with all markets, no bailout was necessary. Libertarianism returned like a phoenix without phoenix subsidies or phoenix stimuli. Why? Truth sells.

What about irrationality? Of course libertarians know people (in markets) can be irrational. People in government can be irrational too, which makes us trust government even less. At least in markets, people have better incentives to get things right. In government, most of the incentives bureaucrats face are perverse. Gov't also have the guns and a virtually unlimited source of revenue (but I repeat myself).